Branches of Foreign Companies
Foreign companies may carry out certain business in Thailand through a branch office. Branch offices are required to maintain accounts only relating to the branch in Thailand.
Having a branch office in Thailand, the foreign corporation could be exposed to civil, criminal and tax liability if the branch office violates any law in Thailand. The foreign head office must appoint at least one branch office manager to be in charge of operations in Thailand.
There is on special requirement for foreign companies to register their branches in order to do business in Thailand. However, most business activities fall within the scope of one or more laws or regulations that require special registration (e.g., VAT registration, taxpayer identification card, Commercial Registration Certificate , Foreign Business License, etc.),either before or after the commencement of activities. Therefore, foreign business establishment must follow generally accepted procedures.
It should be borne in mind that the branch is part of the parent company and therefore the parent retains legal liability for contracts, and for tortious acts done. For tax purposes, a branch is subject to Thai corporate tax at the regular 30% rate on income derived from its business operations in Thailand. It is important to clarify beforehand what constitutes income that is subject to Thai tax because the Revenue Department may consider revenue directly earned by the foreign head office from sources within Thailand to be subject to Thai tax. Therefore, for tax purposes, a branch office is required to apply for a taxpayer identification card and VAT certificate (if applicable) and to file annual corporate income tax returns with the Revenue Department.
A branch office of a foreign entity cannot carry out any reserved business without a Foreign Business License. It must apply for a Foreign Business License with the MOC first, and can operate in a reserved business only after the License has been issued. If the desired business is unique, does not compete with Thai business, or involves dealings among members of an affiliated company, the chance of approval is more probable. Conditions, such as minimum capital, transfer of technology and reporting requirements, may be attached to Foreign Business License. The minimum investment capital must be greater than 25% of the estimated average annual operating expense of the operation calculated over 3 years, but not less than 3 million baht.
Conditions to be complied with by the Branch Office after Obtaining Permission for Operation
A Branch Office that is permitted to operate the business must comply with the following conditions:
- There must be the minimum capital to be remitted to Thailand for the commencement of business operation as stipulated by law. Details of remitting the minimum capital are as follows:
( 1 ) First 25 % of minimum investment within first 3 months ;
( 2 ) Another 25 % of minimum investment within first 1 year ,
( 3 ) Another 25 % of minimum investment within 2nd year , and
( 4 ) Last 25 % of minimum investment within 3rd year.
- The total of loans utilized in the permitted business operation must not exceed seven times the inward remitted funds for the permitted business operation;
- (Loans mean the total liabilities of the business, notwithstanding the liabilities incurred by any form of transaction but excluding trade liabilities occurred from the ordinary course of business, such as, trade creditors, accrued expenses).
- At least one person of the responsible persons for operating the business in Thailand must have a domicile in Thailand;
– (Domicile means the contactable residence in Thailand which can be the place of business, excluding temporary residence such as hotels).
– The document or evidence relating to the permitted business operation must be submitted when the official sent the summons or inquiry.
– There must be the preparation of account and financial statements to be submitted to the Department of Business Development .
Fee for Branch Office
Application fee (non-refundable) is 2,000 baht. If the application is approved, the government fee will be set at the rate of 5 baht for every 1,000 baht or fraction thereof of the registered capital of the parent company, with a minimum of 20,000 baht and a maximum of 250,000 baht. A fraction of 1,000 baht in capital is regarded as 1,000 baht.